How Mobile Innovations Can Help Small Farmers Grow in Colombia
How to develop a digital approac to address core needs of small farmers?
Colombia is fed by small farmers. Every day, three-fourths of the food arriving at its capital, Bogota, is produced by these small farmers. Yet like their counterparts in other parts of the world, they face an uphill battle to stay afloat and grow. While their bigger competitors can take advantage of ready access to information, markets and financing tools, small farmers often lack such access. Until recently, at least.
Grameen Foundation, with the support from the Mastercard Center for Inclusive Growth, developed a digital approach, mSourcing, which begins to address three core needs of small farmers.
Early insights from a pilot test of mSourcing
mSourcing is a mobile tool that helps small farmers in production forecasting and commercial planning. It can also help to track the supply of available produce and offers an ordering system. Grameen Foundation recently tested it with 187 farmers in Antioquia and Nariño, Colombia. Three organizations (Alsur, Fundacion SalvaTerra and Fundacion San Sebastian) worked with the small farmers to identify the following early insights.
1. Fewer errors and greater efficiencies
Order processing time fell sharply. Partners saw a reduction of 40 hours a week in processing orders, as well as a nearly 100 percent accuracy rate from shifting to an electronic system from paper. Time saved in calls and tabulation freed up time to establish relationships and bolster supply.
One buyer for a large retailer noted that the tool helped a small supplier grow. “One year ago, Alsur was considered a small supplier. With the use of the mSourcing tool, Alsur has improved efficiency and increased its supply and today, it is considered a medium to big supplier for Exito Cali, which buys 40 – 50 tons of produce daily from 180 different suppliers.”
2. Stronger cash flows for farmers
Payments were faster. For small farmers operating on thin margins and tight household budgets, settling payment can have an outsized impact on their business stability. mSourcing helped reduce the average timing for payments to farmers from 40 days to 7.
One farmer selling to Alsur commented, “we used to receive our payment more than 30 days after we have sold it and now, we’re able to receive it within a week which allows us to constantly have cash to support our families and invest in our farm.”
3. More responsive data and planning
Planning was easier. Two partners also reported that the data compiled offered better insights into the demand for certain produce. While this data was available prior to the introduction of mSourcing, it is more easily tabulated, offering more timely technical assistance well in advance of the growing season.
4. Building a credit profile
By digitizing and establishing a track record, the goal is that these farmers will ultimately gain better access to credit. In Colombia, for example, despite a fairly well developed financial sector, just 15 percent of the poorest Colombians have an account at a formal institution and only 13 percent received a loan from a formal financial system in the past year. The perceived risk of lending to small farmers is higher than to other segments of the population and financial service providers lack sufficient information about small farmers to achieve the level of comfort needed to extend credit.
mSource joins a growing field
mSourcing is a first generation tool. More advanced solutions that integrate financial services and tap into data analytics have also emerged to bridge the divide. Apollo Agriculture, a fintech firm supported by the Accion Venture Lab, for example, combines a new credit product with advanced analytics, remote sensing and agronomic machine learning.
In early 2017, Mastercard launched 2KUZE a mobile platform to digitally connect small farmers in Kenya, Uganda and Tanzania. Developed by Mastercard’s Lab for Financial Inclusion in Nairobi, it is a mobile solution that improves farmers’ access to markets, increases price transparency and speeds payments.
With more than 235 million unbanked adults worldwide receiving cash payments for the sale of agricultural products and 59 percent of them having a mobile phone, development experts see an enormous opportunity to create and scale solutions that address multiple pain points faced by small holder farmer and other actors in the supply chain, including market access, payments and lack of access to credit and insurance.
“We’re seeing a lot of technological innovation geared toward agriculture, a sector that is typically slower to adopt technology,” said Salah Goss, a vice president for government and development programs at Mastercard who works on agricultural solutions. “To make a deeper and more lasting impact, these applications of technology need be combined with business model innovations that move small holders toward profitability.”